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The Practice of Investment Appraisal

Author

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  • Akalu, M.M.
  • Turner, J.R.

Abstract

This case study examines the capital budgeting practices of four companies operating in different industry. The findings indicate that most companies follow decentralised project decision-making. Despite the use of DCF techniques, there is a tendency to combine with the newly crafted value management tools, which shows a trend shift in the capital budgeting methods. In addition, firms are found trying to modify the original DFC tools so as to accommodate their needs. However, firms don't use the same technique from project inception to completion.

Suggested Citation

  • Akalu, M.M. & Turner, J.R., 2001. "The Practice of Investment Appraisal," ERIM Report Series Research in Management ERS-2001-77-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:140
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    File URL: https://repub.eur.nl/pub/140/erimrs20020107165927.pdf
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    References listed on IDEAS

    as
    1. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    2. Erkki K. Laitinen, 1997. "Estimation of Internal Rate of Return Under Nonsteady Conditions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(9‐10), pages 1217-1251, October.
    3. Fernández, Pablo, 2002. "EVA, Economic profit and cash value added do NOT measure shareholder value creation," IESE Research Papers D/453, IESE Business School.
    4. Erkki K. Laitinen, 1997. "Estimation of Internal Rate of Return Under Nonsteady Conditions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(9&10), pages 1217-1251.
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    Cited by:

    1. Akalu, M.M. & Turner, J.R., 2002. "Adding Shareholder Value through Project Performance Measurement, Monitoring & Control," ERIM Report Series Research in Management ERS-2002-38-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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    More about this item

    Keywords

    DCF methods; Investment appraisal; project; shareholder value analysis; value management techniques;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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